Affiliate Marketing Budgets are Shrinking

The Affiliate Marketing Survey Report 2008, which was conducted by E-consultancy and R.O.EYE, found that 46% of merchants rate the affiliate marketing channel as very cost-effective for driving customer acquisition, up from 44% last year.

But the new report, compared with last yearâ€™s survey, indicates that the average proportion of online marketing budget designated to affiliate marketing has dropped from 18% to 14% since 2007, and the proportion of online sales ascribed to affiliate activity has decreased from 16% to 12% over the same period.

Nearly 60% of merchants in the survey considered affiliate relationships and sector experience as crucial to a successful program, which focuses on the need to prioritize investments in internal resources or outsourcing for affiliate programs.

Some other key findings:

A third of merchants (34%) say that five or fewer affiliates are driving 80% of their affiliate sales of sign-ups. A further 23% say that between six and ten affiliates account for 80% of sales.

A quarter of merchants say they are not de-duping sales across different digital marketing channels. More than a quarter of merchants (28%) say their organisations are poor at managing networks and monitoring affiliate activity.

For attributing the credit for sales, 41% of merchants are using the last click method. A quarter of respondents say that they are using a combination of methods while 10% are now sophisticated enough to split the CPA across different channels.

The three biggest barriers to successful affiliate marketing, from the perspective of merchants, are lack of internal resource, restricted budget and difficulty in attracting affiliates.

The Affiliate Marketing Survey Report 2008 is based on the findings of a survey of more than 250 merchants and 150 agencies in July.

“Whilst the research represents something of a wake-up call for the industry, the good news for affiliate marketing is that merchants continue to regard it as a cost-effective channel for driving customer acquisition. However, there has been a slight decrease in investment in affiliate activity which can be attributed to several factors,” according to Linus Gregoriadis, E-consultancyâ€™s Head of Research.

“Whilst reduced budgets due to the economic downturn may be partly responsible, merchants are also getting better at getting traffic directly to their sites and they are also refining their approach so that they are not paying out for sales unnecessarily,” continued Gregoriadis.